fundamental overview

supply and demand fundamentals

through the latest OPEC report and other leading economic indicators, the pace of economic and manufacturing activity is highly expected to increase in the third quarter 2020 compared to the previous one.

this implies an increase in world oil demand. OPEC anticipates an increase by 12.57% in demand in the third quarter to 92.2 million bpd compared with 81.9 in Q2- 2020.

the supply side is also expected to decrease significantly . by taking a look to the graphs below we see expected decrease in supply and increase in demand through Q3 – 2020 which helps fundamentally to push prices higher.

opec oil demand estimates
non opec production estimates

u.s crude oil stock change

the U.S crude oil inventories started lately decreasing, making a significant support to oil prices. as the decrease in inventories indicates either lower supply or higher demand or both .

looking at the chart below to the inverse correlation between oil price and the twelve months average change in u.s crude oil inventories. we expect that inventories have peaked up on a twelve months average and may start soon a shift to the downside which is highly correlated with the increase in oil prices.

eia crude oil inventories chart

technical analysis

the recent close of the previous large gap down is a strong indicator for price to continue to the Upside. this comes with continuous trading above short term moving average of 21 periods.

the RSI is continuing its upward move above 50 on a rising momentum, which gives oil price more positive push to the upside.

we expect oil prices to continue trading higher, especially with the latest increase in momentum . our target for the third quarter is primarily to reach 50.0 $.

any target above 50$ is so difficult to be forecasted for the time being regarding the uncertainty around the outlook and the continuous effect of COVID-19 pandemic.